Obama to push for housing reform of mortgage giants

Mandel Ngan | AFP | Getty Images

The president boards Air Force One on his way to Phoenix and Los Angeles.

President Barack Obama will use Phoenix as a backdrop to tout his administration's accomplishments in the housing recovery and to admit that more work needs to be done, according to a White House release.

He is likely using Phoenix, one of the hardest hit housing markets in the recent crash, because while home prices there are up more than 20 percent from a year ago, they are still down over 40 percent from their peak in 2006.

(Read more: Map: Tracking the US real estate recovery)

The president will offer ideas "to help more responsible homeowners refinance, to cut red tape, to increase home values by fixing our broken immigration system, to help the hardest-hit communities rebuild, and to ensure those who rent have decent and affordable options," the release read.

Obama will also call for reform of mortgage giants Fannie Mae and Freddie Mac, which, while now highly profitable, are still blamed for much of the foreclosure crisis.

While not backing a specific proposal on Capitol Hill, and there are many, the president does believe there is "a limited and targeted role for a catastrophic guarantee" for the mortgage market, according to one senior administration official.

(Read more: Homeownership is still a dream, if not a reality right now)

A bill in the Senate backed by Sens. Corker and Warner generally matches the principles for mortgage reform that the president will lay out in his speech.

The crux of his call, however, will be for more mortgage refinancing, which is, ironically, harder now that mortgage rates are rising. Rates are rising because the Federal Reserve is signaling that it will stop buying mortgage-backed securities now that the economy is improving.

Applications to refinance are already down nearly 60 percent from a year ago, according to the Mortgage Bankers Association. Mortgage rates on the 30-year fixed rose from 3.5 percent in May to nearly 5 percent in July, settling now around 4.5 percent.

The government's Home Affordable Refinance Program has been successful, allowing more than 2 million borrowers, some with negative home equity, to take advantage of lower rat, but only borrowers with government-backed mortgages qualify.

That has left millions of borrowers out. Obama has pushed for more refinancing in the private mortgage market and will call for it once again. Senior administration officials, however, admit that "the window is closing given interest rates coming up over the last few months."

(Read more: Homeownership may be for the few rather than the many)

The president will also push for more community-based assistance to help first-time homebuyers get into vacant, foreclosed homes.

Phoenix perhaps is not the best backdrop for this. The recovery there was driven more by private investors in distressed homes than by any government-backed mortgage rescue. Investors bought these homes in bulk and are now renting them for profit.

These same investors, largely using all-cash, pushed first-time buyers out of the Phoenix market and continue to do so in several other markets across the nation, where lower-income buyers might have been able to take advantage of distressed homes.

Obama will offer "targeted ways to make sure first-time buyers have a fair shot competing," an administration official said.

—By CNBC's Diana Olick. Follow her on Twitter @Diana_Olick.